Investors worldwide have placed their confidence in Vanguard.
Vanguard funds are incredibly popular with investors because of the investment management firm's no-frills approach. Its suite of index funds are easy to understand, cost-effective to own and often command hundreds of billions of dollars in assets apiece. Collectively, Vanguard's exchange-traded funds and mutual funds add up to some $7.5 trillion in investments under its purview. If you believe in the wisdom of crowds, then the fact that so many investors worldwide trust Vanguard with their cash has to be a good sign. And if you're a hands-off investor looking for safe and effective funds to buy and hold for the long term, these six Vanguard funds could be a great place to start.
Vanguard S&P 500 ETF (VOO)
As Vanguard's flagship ETF, VOO invests in the stocks that make up the big names of the S&P 500, which represents 500 of the largest publicly traded U.S. companies. There's a staggering $770 billion in assets in this fund, making it one of the most popular investment vehicles in the world. It lists popular megacap stocks at the top of its holdings including Apple Inc. (AAPL), JPMorgan Chase & Co. (JPM) and Johnson & Johnson (JNJ). It's worth noting that about half of all assets are in this fund's top 10 holdings, making it a bit top-heavy, but these are entrenched companies that are very unlikely to go under anytime soon. And as is typical of Vanguard index funds, the expense ratio is among the lowest you'll find on Wall Street at just 0.03% or $3 annually on every $10,000 invested.
Vanguard Russell 2000 ETF (VTWO)
Of course, large and mature companies offer a bit more stability, but it's highly unlikely that investors are going to see multitrillion-dollar companies double or triple again in short order given their already impressive scale. That's where this Russell 2000 ETF comes in. This index of smaller stocks is formulated by skipping the top 1,000 U.S. corporations, then building a portfolio using the next 2,000 in line. That means just about the largest stock you're going to get is one like footwear purveyor Crocs Inc. (CROX), which is currently valued at just less than $11 billion. That's compared to the S&P 500, where the largest stocks are 100 times larger. Over the long term, picks like that may have more upside as they grow and mature.
Vanguard Mid-Cap ETF (VO)
The "Goldilocks" approach in between the large-cap S&P fund and the smaller Russell 2000 fund is VO, a mid-cap fund comprising about 380 stocks with a median market capitalization of around $25 billion or so. That includes HVAC manufacturer Carrier Global Corp. (CARR), semiconductor stock Marvell Technology Inc. (MRVL) and financial services provider MSCI Inc. (MSCI). With only about 7% of total assets in its top 10 holdings, this is a pretty diversified lineup of companies. It could provide nice long-term upside thanks to a well-rounded portfolio of companies that still have room to run but are well-capitalized enough to weather any short-term volatility.
Vanguard FTSE All-World ex-US ETF (VEU)
VEU offers a different approach that could be appealing to some investors, either as a tactical play on global growth or simply a supplementary play to add geographic diversification to an otherwise domestic portfolio. This ETF has a massive list of 3,600 total stocks from everywhere but the U.S., with top nations by weight being Japan (17%), China (10%) and the U.K. (9%). But don't think that means you're getting into complicated or risky companies. Even if they are headquartered abroad, many top holdings, such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) or Switzerland's Nestle SA (NSRGY), should be familiar to U.S. investors.
Vanguard Total World Stock ETF (VT)
Don't want to play favorites on size or geography? VT offers a one-stop shop with an ETF that offers exposure to the entirety of all stocks on the planet. Or at least, it's near enough, with a total portfolio of about 9,300 stocks. The companies that investors will rely on most are quite familiar, however, as the portfolio's top holdings include major U.S. tech stocks. Plus, nearly 60% of the entire portfolio is in American-domiciled companies. That said, about 11% of holdings are in emerging markets like India and Brazil. So if you're taking a long-term approach to stocks, this fund should offer a nice mix of stable domestic names, diversification into other developed markets and a dash of emerging market growth.
Vanguard Total Bond Market ETF (BND)
Some investors may be wondering where the fixed-income funds are after all these equity-focused offerings from Vanguard. The final ETF on this list covers the important strategy of income investing with one of the leading bond funds on Wall Street. With a portfolio of more than 10,000 individual bonds and total assets of more than $315 billion, this is an incredibly popular way to look beyond stocks in order to either add yield to your portfolio or provide diversification into another asset class. Admittedly, the total yield of this fund is only about 1.5% at present as interest rates remain fairly low. In the long run, this fund could yield more, however, or at least still provide an important foundation for your portfolio to avoid volatility if and when the stock market hits a troubled patch.
Here are the best Vanguard funds to buy and hold:
-- Vanguard S&P 500 ETF (VOO)
-- Vanguard Russell 2000 ETF (VTWO)
-- Vanguard Mid-Cap ETF (VO)
-- Vanguard FTSE All-World ex-US ETF (VEU)
-- Vanguard Total World Stock ETF (VT)
-- Vanguard Total Bond Market ETF (BND)